Using a cell-based assay, we have identified optimal residues and key recognition elements necessary for inhibition of gamma-secretase. An (S)-hydroxy group or 3,5-difluorophenylacetyl group at the amino terminus and N-methyltertiary amide moiety at the carboxy terminus provided potent gamma-secretase inhibitors with an IC50 < 10 nM. (C) 2004 Elsevier Ltd. All rights reserved.